AirAsia X shows court creditors’ support for restructuring plan

The AirAsia X Bhd is seeking to restructure $15.87 billion of debt. (Reuters)
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Updated 14 January 2021

AirAsia X shows court creditors’ support for restructuring plan

  • Supportive lessors said they wanted to continue discussions with the budget airline and potential new investors

KUALA LUMPUR: Most of AirAsia X Bhd (AAX)’s lessors support a restructuring plan, and the Malaysian airline has received interest from potential investors for fundraising after reorganization, court documents filed this month show.
In emails attached to the court filings, supportive lessors said they wanted to continue discussions with the budget airline and potential new investors, seeking more equitable terms and new commercial arrangements.
The affidavits come after more than a dozen creditors filed to intervene with its proposed court-supervised restructuring, with lessor BOC Aviation Ltd. and airport operator Malaysia Airports Holdings Bhd arguing that AAX is “hopelessly insolvent.”
Planemaker Airbus also filed a lawsuit last month saying it could lose more than $5 billion worth of aircraft orders if the low-cost, long-haul carrier proceeded with the plan.
AAX’s senior legal counsel, Shereen Ee, said in court documents seen by Reuters that 15 out of 20 aircraft lessors were not in favor of AAX liquidating, and three other interveners – Airbus, Rolls-Royce Group and BNP Paribas – were “not objecting” to the restructuring plan.
Lessors in favor of a restructuring include Macquarie Aircraft Leasing Services and Aircastle, according to the documents. Rolls-Royce, Macquarie Aircraft Leasing Services and Aircastle did not immediately respond to requests for comment.
An Airbus spokesman declined to comment, saying that the company was continuing discussions but that the details are confidential. AirAsia X also declined to comment.
BNP Paribas – which is a trustee acting on a creditor’s instructions – declined to comment.
Aircastle Asia Pacific executive vice president Nigel Harwood told AAX in an email that his firm was not seeking liquidation of the airline, according to the court filings.
“We look forward to working with you to arrive at a revised commercial arrangement once we understand your future business plan with the introduction of new investors,” he said.
Macquarie’s email said it was willing to support a recapitalized AAX and make a restructured lease agreement on condition that the airline has a detailed business plan, credible third-party investors and that lessors have a meaningful say, according to the filings.
AAX said it had received 10 letters from Malaysian and Singaporean corporations and high net worth individuals indicating interest to participate in its proposed fundraising exercise, according to an affidavit.
The 10 includes Tune Group Sdn Bhd, owned by AirAsia Group Bhd co-founders Tony Fernandes and Kamarudin Meranun. Tune is the largest AAX shareholder, with a 17.83 percent stake.
AAX said it also received interest from a public-listed financial group and the subsidiary of another, both preferring to be unnamed.
AAX, an affiliate of AirAsia Group, last month said it planned to raise up to $49.49 million by issuing shares to new investors after its debt restructuring.
The airline is seeking to restructure $15.87 billion of debt. Its accrued debt amounts to $554.28 million, without taking into consideration contingent debts such as its large aircraft order book with Airbus.
Some lessors have argued the Airbus orders should be excluded. However, AAX said the contingent debts must be dealt with and will be reduced by the re-negotiated leases and other commercial contracts.
AAX estimated that lessors that continue with the airline post-restructuring would be able to recover approximately 44 percent-66 percent of their lease rental loss under new agreements.


UK inflation starts climb as effects of COVID-19 and Brexit combine

Updated 16 min 26 sec ago

UK inflation starts climb as effects of COVID-19 and Brexit combine

  • Inflation has been below the Bank of England’s 2 percent target since mid-2019
  • ‘We are going to be talking a lot more about inflation in 2021 than we did 2020’

LONDON: British inflation gathered speed in December, starting what is expected to be a climb this year as pandemic-fighting measures, Brexit and a recovery in the economy combine to push up costs for consumers and businesses.
Consumer prices rose 0.6 percent in annual terms after a 0.3 percent increase in November, the Office for National Statistics said.
A Reuters poll of economists had pointed to a rate of 0.5 percent.
A temporary easing of COVID-19 travel restrictions helped to push up air and sea fares while a rise in global oil prices made fuel more expensive and the price of clothes also rose.
Inflation has been below the Bank of England’s 2 percent target since mid-2019 and the COVID-19 pandemic pushed it close to zero as the economy tanked.
But it is likely to rise as the impact of value-added tax cuts and other emergency pandemic measures fade from the statistical comparisons, and because of Britain’s new, less open trading relationship with the European Union.
“We are going to be talking a lot more about inflation in 2021 than we did 2020,” said Jeremy Thomson-Cook, an economist at foreign exchange company Equals Group. “Both Brexit and COVID-19 are factors that have caused substantial pain for businesses and their supply chains.”
A Reuters poll of economists published last week showed inflation is likely to rise to close to the BoE’s 2 percent target by the end of this year, and some like Capital Economics think it will peak at 2.5 percent.
But economists see little pressure on the BoE to start raising interest rates from their all-time low any time soon with Britain’s economy still about 10 percent smaller than before the pandemic.
Samuel Tombs, an economist with Pantheon Macroeconomics, said a rise in unemployment after the end of the government’s job protection scheme — scheduled for April — was likely to keep a lid on domestic inflation pressures.
“The (BoE) will not need to even talk about the prospect of interest rates rising in future within the next two years,” Tombs said.
The ONS said air and sea fare prices rose last month, making transport services the biggest contributor to the increase in inflation during December.
Prices at petrol pumps rose by 1.5 pence per liter.
Clothing and footwear prices — which rose last month, unlike in December 2019 — also contributed to higher inflation.
The ONS said factory gate prices fell last month by the least in annual terms since March, down 0.4 percent, and the measure for core output prices rose by the most since September 2019, up 1.2 percent.